IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v8y2024i11p118-127.html
   My bibliography  Save this article

Does Human Capital Influence the Relationship Between Highest-Paid Director Compensation and Financial Performance in Nigerian Banks?

Author

Listed:
  • Ahmed Abubakar Zik-Rullahi

    (Department of Accounting, Faculty of Management Sciences, University of Abuja, P.M.B 117, Gwagwalada-Abuja)

  • Haleemah Yetunde Zik-Rullahi

    (Department of Accounting, Nile University of Nigeria, Jabi, Abuja, Nigeria)

Abstract

This study examines the influence of human capital on the relationship between highest-paid director compensation and financial performance in listed deposit money banks in Nigeria, focusing on Net Interest Margin (NIM) and Tobin’s Q as performance indicators. The study adopted a Feasible Generalized Least Squares (FGLS) regression analysis to test the moderating effect of human capital, incorporating interaction terms between director compensation and human capital metrics. The analysis indicates that higher compensation for the highest-paid director is associated with lower Net Interest Margin, suggesting a negative impact on financial performance. In contrast, no significant relationship was found between director compensation and Tobin’s Q. Additionally, the interaction between director compensation and human capital did not demonstrate a significant effect on either performance indicator. These findings lead to the conclusion that while higher remuneration for directors may negatively affect NIM, there is no meaningful link with Tobin’s Q. The study underscores the importance of human capital as a potential moderator and highlights the need for banks to reassess their compensation strategies and enhance governance frameworks to ensure that executive pay structures effectively promote organizational performance.

Suggested Citation

  • Ahmed Abubakar Zik-Rullahi & Haleemah Yetunde Zik-Rullahi, 2024. "Does Human Capital Influence the Relationship Between Highest-Paid Director Compensation and Financial Performance in Nigerian Banks?," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(11), pages 118-127, November.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:11:p:118-127
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-8-issue-11/118-127.pdf
    Download Restriction: no
    File URL: https://rsisinternational.org/journals/ijriss/articles/does-human-capital-influence-the-relationship-between-highest-paid-director-compensation-and-financial-performance-in-nigerian-banks/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
    2. Nawazish Mirza & Jamila Abaidi Hasnaoui & Bushra Naqvi & Syed Kumail Abbas Rizvi, 2020. "The impact of human capital efficiency on Latin American mutual funds during Covid-19 outbreak," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-7, December.
    3. Muhammad Ali & Abiodun Egbetokun & Manzoor Hussain Memon, 2018. "Human Capital, Social Capabilities and Economic Growth," Economies, MDPI, vol. 6(1), pages 1-18, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Salem Gheit, 2022. "A Stochastic Frontier Analysis of the Human Capital Effects on the Manufacturing Industries’ Technical Efficiency in the United States," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 8(3), pages 215-238, July.
    2. Shogren, Jason F. & Parkhurst, Gregory M. & McIntosh, Christopher, 2006. "Second-price auction tournament," Economics Letters, Elsevier, vol. 92(1), pages 99-107, July.
    3. Calcagno, R. & Renneboog, L.D.R., 2004. "Capital Structure and Managerial Compensation : The Effects of Renumeration Seniority," Discussion Paper 2004-120, Tilburg University, Center for Economic Research.
    4. Md. Mominur Rahman & Bilkis Akhter, 2021. "The impact of investment in human capital on bank performance: evidence from Bangladesh," Future Business Journal, Springer, vol. 7(1), pages 1-13, December.
    5. Güth, W., 1997. "Boundedly Rational Decision Emergence -A General Perspective and Some Selective Illustrations-," SFB 373 Discussion Papers 1997,29, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    6. Rayton, Bruce A., 2003. "The residual claim of rank and file employees," Journal of Corporate Finance, Elsevier, vol. 9(1), pages 129-148, January.
    7. Rym Ayadi & Emrah Arbak & Willem Pieter De Groen, 2012. "Executive Compensation and Risk-taking in European Banking," Chapters, in: James R. Barth & Chen Lin & Clas Wihlborg (ed.), Research Handbook on International Banking and Governance, chapter 8, Edward Elgar Publishing.
    8. Rajesh K. Aggarwal & Andrew A. Samwick, 1999. "Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(6), pages 1999-2043, December.
    9. Krishna B. Kumar & Raghuram G. Rajan & Luigi Zingales, "undated". "What Determines Firm Size?," CRSP working papers 496, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    10. Brickley, James A. & Linck, James S. & Coles, Jeffrey L., 1999. "What happens to CEOs after they retire? New evidence on career concerns, horizon problems, and CEO incentives," Journal of Financial Economics, Elsevier, vol. 52(3), pages 341-377, June.
    11. Martin Bugeja & Stephanie Fohn & Zoltan Matolcsy & Neil Fargher, 2016. "Determinants of the levels and changes in non-executive director compensation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(3), pages 627-667, September.
    12. repec:hal:spmain:info:hdl:2441/5qjkarlp3e8a2a40vbqo698d3v is not listed on IDEAS
    13. Tiantian Gu & Anand Venkateswaran, 2018. "Firm-supplier relations and managerial compensation," Review of Quantitative Finance and Accounting, Springer, vol. 51(3), pages 621-649, October.
    14. Sonja Daltung & Vittoria Cerasi, 2006. "Financial structure, managerial compensation and monitoring," FMG Discussion Papers dp576, Financial Markets Group.
    15. Dendi Ramdani & Arjen Witteloostuijn, 2012. "The Shareholder–Manager Relationship and Its Impact on the Likelihood of Firm Bribery," Journal of Business Ethics, Springer, vol. 108(4), pages 495-507, July.
    16. Stadler Manfred & Unsorg Maximiliane, 2022. "Manager Delegation, Owner Coordination and Firms’ Investment in Automation," Review of Economics, De Gruyter, vol. 73(2), pages 159-182, August.
    17. Chen, Yenn-Ru & Lee, Bong Soo, 2010. "A dynamic analysis of executive stock options: Determinants and consequences," Journal of Corporate Finance, Elsevier, vol. 16(1), pages 88-103, February.
    18. Fabbri, Francesca & Marin, Dalia, 2012. "What explains the rise in CEO pay in Germany? A Panel Data Analysis for 1977-2009," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 374, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    19. Kuang, Yu Flora & Qin, Bo, 2009. "Performance-vested stock options and interest alignment," The British Accounting Review, Elsevier, vol. 41(1), pages 46-61.
    20. Muhamadu Awal Kindzeka Wirajing & Tii N. Nchofoung & Roger Tsafack Nanfosso, 2024. "Inclusive education and labour productivity: The case of Sub‐Saharan African countries," South African Journal of Economics, Economic Society of South Africa, vol. 92(4), pages 498-523, December.
    21. Keith D. Harvey & Ronald E. Shrieves, 2001. "Executive Compensation Structure And Corporate Governance Choices," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 24(4), pages 495-512, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:8:y:2024:i:11:p:118-127. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.